Advice on best way forward please?

Dino-saw

Hi all

Remaining lease 68 years
Cost to extend by 90 years - c£15k
Mortgage balance remaining - £105k
Property value as is - £167 (according to high street lender)
Property value with extended lease - £200-210 (according to estate agents)

My sister has come to the end of her mortgage deal with a high street lender and will soon be on SVR as they will not lend with a discounted deal due to less than 70 years remaining on lease. 

She has no cash with which to buy the lease extension so is looking to finance it but loans are not cheap (around 10% - so c£300 pcm, which is too much). Her current mortgage provider will not add the required £15k to the SVR mortgage.

IMPORTANT - she hates the apartment so wants to sell it.

I don't think she has the patience to be a landlord for a couple years either.

What's the best way to finance the purchase of the lease extension, bearing in mind she will sell it immediately?

Thanks all

RHemmings

Can you loan her the £15k yourself? Lending money to family can end up being very problematic. But, you know your sister and your relationship with her. If you can cut out commercial lenders, then that has a number of advantages. But, it needs trust and confidence. And, £15k available from you and/or other family members if you go in together. 

eddddy

I assume you're talking about a 'Statutory Lease Extension'. (And I assume the property is a flat, not a house.)

Have you taken into account the £3k to £4k legal and valuation fees?

And it could take 6 to 18 months to complete the lease extension.

Dino-saw said:

What's the best way to finance the purchase of the lease extension, bearing in mind she will sell it immediately?

You could ask the freeholder if they would cooperate with your sister selling the flat with an Informal Lease Extension on Completion. (Maybe by offering the freeholder £20k for the 90 year lease extension, as a 'sweetener'.)

It might work something like this...

• You advertise the flat for £200k with a 158 year lease on completion

• On completion £180k goes to your sister, and £20k goes to the freeholder for the lease extension

But as I say, you would need the freeholder's full cooperation with this.

dinosaur66

15k as far as my limited knowledge of flat lease extensions go seems very good and as cheap as you would get on a 200k leashold property and would make it easily sellable

i am my siblings bank of last resort so not sure how to go about finding another 15k but since she wants to sell it/  a loan from a family member would be short term 2 year max loan 

edddy post is worth trying first / i have read of this  albeit it is all down to freeholder

Dino-saw

eddddy said:

I assume you're talking about a 'Statutory Lease Extension'. (And I assume the property is a flat, not a house.)

Have you taken into account the £3k to £4k legal and valuation fees?

And it could take 6 to 18 months to complete the lease extension.

Thanks
Yes - a flat.
No - re fees. She enquired, was given an initial price of £16,600, asked for a reduction to £13,500 and was finally offered £15,800. Are you saying she'd be paying solicitor fees of £3-4k on top?
6-18 months? Even with the offer on the table?

Dino-saw

RHemmings said:

Can you loan her the £15k yourself? Lending money to family can end up being very problematic. But, you know your sister and your relationship with her. If you can cut out commercial lenders, then that has a number of advantages. But, it needs trust and confidence. And, £15k available from you and/or other family members if you go in together. 

Thanks 
Yeah, that's not an really option - two daughters in uni has cleaned me out - £15k doesn't even cover their rent!

Dino-saw

dinosaur66 said:

15k as far as my limited knowledge of flat lease extensions go seems very good and as cheap as you would get on a 200k leashold property and would make it easily sellable

i am my siblings bank of last resort so not sure how to go about finding another 15k but since she wants to sell it/  a loan from a family member would be short term 2 year max loan 

edddy post is worth trying first / i have read of this  albeit it is all down to freeholder

Thanks
Yes it seems good value - I thought it would be £20kish.
Eddys idea won't work for her - she won;t do the groundwork and is too easily stressed - has to be simple.

eddddy

Dino-saw said:

eddddy said:

I assume you're talking about a 'Statutory Lease Extension'. (And I assume the property is a flat, not a house.)

Have you taken into account the £3k to £4k legal and valuation fees?

And it could take 6 to 18 months to complete the lease extension.

Thanks
Yes - a flat.
No - re fees. She enquired, was given an initial price of £16,600, asked for a reduction to £13,500 and was finally offered £15,800. Are you saying she'd be paying solicitor fees of £3-4k on top?
6-18 months? Even with the offer on the table?

So it sounds like you're talking about an 'informal lease extension' - and not a 'statutory lease extension'.

If the freeholder has agreed to an 'informal lease extension', it's very possible that the freeholder will agree to a 'lease extension on completion'. 


An 'informal lease extension' could be arranged in a few weeks, and the legal fees could be lower.


BUT... how much do you trust the freeholder? With an 'informal lease extension', there is lots of scope for a nasty freeholder to trick a naïve leaseholder. For example...

• The £15.8k might be an excessively expensive price
• The freeholder might ask for large fees on top
• The freeholder might increase the price, just before exchange of contracts
• The freeholder might have no intention  of extending the lease - they're just stringing your sister along (in order to make more money later) 

If your sister did a statutory lease extension instead, she would have statutory protection - but it would probably take longer (6 to 18 months) and have higher fees. But it might be cheaper than £15.8k.

Dino-saw

eddddy said:

If your sister did a statutory lease extension instead, she would have statutory protection - but it would probably take longer (6 to 18 months) and have higher fees. But it might be cheaper than £15.8k.

Great advice Eddddy.
Nationwide has offered her the mortgage she needs at SVR for £900 - no exit fee. I think its the best option for her given circumstances, but she's likely to gamble on not having statutory protection. The fee negotiated is actually less than the calculator said it would be, so fingers crossed with regards to all teh things that could go wrong.